Wales has been brave enough to completely rethink the hated council tax. Take note, England

<span>Photograph: Wales/Alamy</span>
Photograph: Wales/Alamy

It is the very worst of taxes. (Probably – there’s tough competition for that title.) Council tax is, as it stands, “indefensible” says the Institute for Fiscal Studies. Brutally regressive, it lets mansion owners off with a negligible contribution to their local authority, while those in cheaper homes, and least able to afford it, pay far too much. It acts as a kind of anti-wealth tax.

At long last, we have a government brave enough to reform it. Not in England, of course, but the Welsh government, as often before, dares to go where others fear to tread. Its consultation on proposals to redistribute the tax so the broadest shoulders bear a fairer share ends next week, with three options for degrees of redistribution being considered.

This is real levelling up – not something the Tories ever backed. Under the most ambitious plan, it would increase the number of council tax bands to 12, better reflecting actual values at top and bottom, meaning an area that is high in the deprivation index, like Blaenau Gwent, would see a sharp fall in what most people pay, while wealthier Monmouth and Vale of Glamorgan (which both have Conservative MPs) would see a rise. Bills in inner-city Swansea and Cardiff tax would fall by between £250 and £500 a year, while the outer suburbs would pay the same amount more. This is revenue neutral, not a plan to raise more tax but simply to make it fairer, ease the plight of those on lower incomes.

The history of this tax is disgraceful. Drawn up on the back of an envelope by John Major, rushing to abolish Margaret Thatcher’s career-ending poll tax, this temporary system was intended to be rapidly revisited. It never was. From the start, it was unjust. In his book, Follow the Money, the director of the IFS, Paul Johnson, points out that even in 1991, when the tax bands were set, and H, the most valuable properties, paid only three times more than the least valuable band A homes, despite being worth eight times more – and now that gap is far wider. Of all the needed tax reforms, this, he writes, is “a complete no-brainer”. The valuation of property has stayed unchanged since 1991 in England and Scotland – though Wales had a minor revaluation 20 years ago. He says the average Westminster property pays a mere 0.06% of its value, while in Hartlepool they pay 1.3%, a proportion more than 20 times higher.

Citizens Advice Cymru, in a shocking report on council tax arrears at crisis level, expects this reform to relieve the burden on many households. More than half those in council tax arrears have a deficit budget, with more going out in bills than their incomes can cover. There are council tax reduction schemes, but ever since universal credit came in, they have to be applied for. The complexity is fiendish: the unreformed Welsh system has 53 different exemptions and reductions, but Citizens Advice Cymru says most council tax debtors are unaware of any of them.

It’s a much-hated, unjust tax, yet no government until now has dared revalue properties. Why? Political cowardice, even if, as in the Welsh plans, there are many more winners than losers. The losers will be richer, more powerful and mostly older and louder, while the long-running survival of such an unfair tax is a reminder of how those on the lower rungs can never raise the same level of political decibels in protest.

Rebecca Evans, Wales’s minister for finance and local government, sitting in the government offices in Cardiff, taps the table when I ask if she worries about the noisy losers. “The focus groups were very instructive. We discovered just how little awareness there is about what council tax is and what it does,” she says. “But we must do this as it’s the single most important thing we can do for fairness.” It’s part of Labour’s cooperation agreement with Plaid Cymru, as it was in both their manifestos. Was she tempted by a local income tax? “No, because property is harder to hide than income, and property is a good proxy for income.”

Related: Mark Drakeford: ‘I hope people will see we did challenging and radical things’

But she has a much more radical idea afloat. “We are actively pursuing a land value tax,” she says, as that is more progressive and encourages development. “And we want power to impose a vacant land tax, to stop developers sitting on land earmarked for building. ” She wants to raise money with a visitors’ levy to cover the cost of tourism, as she says: “The UK is an outlier for not having one.” She sighs at relations with near-anarchic Tory Westminster: “For negotiations on complex fiscal matters, I’m on my eighth chief secretary [to the Treasury] since 2018.” She’d just had her first telephone conversation with the latest.

Reforming council tax is “unambiguously a good idea”, says the IFS in its analysis of the Welsh government plan. Though it regrets the “unfortunate” retention of the 25% discount for single residents, as it benefits the wealthy most and doesn’t encourage single people to move out of over-large homes. But there’s only so much reform they can attempt in one jump. Welsh councils have just been given the power to levy a 300% council tax rate on second homes.

The great hope of devolution is that governments experiment with new ideas. Wales has a good record: it was first to charge for plastic bags, first to pay the real living wage to care workers, first to pilot a basic income for care leavers; and it banned smoking in public places, cracked down on no-fault evictions for renters, and is rolling out free school meals for all primary pupils ahead of England doing so. England often follows, dragging its feet, where devolved governments show what can be done. Westminster will be watching Welsh council tax reform to see how much noise the wealthy losers make.

Mark Drakeford, Welsh first minister and due to step down next month, has been a pioneer. Watching him from the gallery at first minister’s questions, where Senedd members discuss the terrible news of 3,000 jobs to go at Port Talbot steelworks, I think how unrecognisable this scene would be to Westminster’s observers. Courteous, speaking in Welsh and English, Drakeford presides over none of the mindless insults, false facts, jokes and boorishness of the Commons PMQs. The political divides are just as intense, but this modern, round chamber, electing members fairly in proportion to votes cast, has lessons to teach. If they can lead the way with a successful council tax reform, that would be another Welsh gift to the rest of the UK.

  • Polly Toynbee is a Guardian columnist